Thursday, October 29, 2009

WASHINGTON (Reuters) - The number of U.S. workers filing new claims for jobless benefits dipped by 1,000 last week, while the number collecting long-term aid fell to the lowest reading in seven months as the job market steadied. Another key gauge of underlying labor market health, the 4-week moving average for new claims, decreased by 6,000 to 526,250, which was the smallest reading since January.

MP: The 4-week moving average of 526,250 is now 132,500 below the early April peak of 658,750, and has dropped to the lowest level since January 17, a 40-week low.

6 Comments:

I agree that this is good news. I'm also somewhat surprised how small the bump in the 4-week claims went following the minimum wage hike. I'll say it: "I was wrong" in expecting the secondary peak from the minimum wage hike to exceed the initial peak.

I still find it interesting that the first time claims numbers are still well over 500,000/wk. My recollection is that first time claims over 400,000/wk signalled recession and under 300,000/wk signalled overheating.

I think the real check will be when the October unemployment report comes out. Has the employment level reached bottom yet? Even though GDP grew in 3Q09, we were officially in a recession according to the NBER in 2008 when we had growth in the GDP. I think the key statistic they look at is total employment. It peaked in November 2007 (recession start) and has not seen the bottom yet (unless October is up from September.

I'm also somewhat surprised how small the bump in the 4-week claims went following the minimum wage hike. I'll say it: "I was wrong" in expecting the secondary peak from the minimum wage hike to exceed the initial peak.

Don't forget, the minimum wage hike was passed long before it took place. So employers knew that it was coming. Plenty of employers make their hiring plans months in advance, and wouldn't hire someone only to let them go in a month or two.

This is a simple flow balance equation that has somehow morphed itself into a statistical novelty.

Fill the bucket with the newly unemployed, and count them as not existing at a certain point in time (flow through a hole in the bucket) and you've proven...nothing by the rate of inflow.

It reminds me of the trick where you have five glasses, each larger than the other. The magician fills the first, smallest one, with milk, to top it off. He then transfers the milk from the first to the next largest cup, which miraculously fills to the top. This continues until the fifth cup where the audience is astounded by the three times larger cup, topping off with the same amount of liquid as the first cup used.

Of course, the trick is that each cup is filled with an increasingly larger acrylic core. It's one of the first tricks young magicians use, and so it is with the Unemployment (U3) number and government bureaucracies.